In the last few years an economic downturn has created a major focus on cost cutting and efficiency initiatives across many types of industries. One of the greatest impacts of the economic downturn, in the years 2002 to 2003, has been seen within the financial services sector which has seen an increase in governmental regulation and a demand for greater transparency in financial reporting, accounting and risk management.
In response to cost cutting Chief Information Officers have sought to simplify and consolidate their financial services infrastructure. This has been achieved by replacing current information technology (IT) infrastructure with new products and services and/or finding opportunities for out-sourcing and off-shoring their service and infrastructure support. While this approach may have delivered short term benefits, the technical infrastructure which is left under the financial enterprise's control is ill-equipped to meet the demands of industry growth. To meet these demands requires financial enterprises to respond more rapidly to new market opportunities, economic changes and competitive threats. The complexity of IT infrastructure and applications which support the financial enterprises often inhibit the ability to respond rapidly while containing cost, and to deliver greater transparency.
Previous industry growth was achieved by rapid geographic expansion and mergers, both of which have left a legacy of increased complexity at a business level, an application level and a technical level. With a few notable exceptions, what has emerged is a significant duplication and redundancy at each of the above levels. This additional complexity had made it increasingly difficult to achieve many of the goals of cost cutting and the delivery of transparency mandated by many regulatory requirements.
Thus many financial service enterprises are left with trying to achieve organic growth and to operate an efficient and secure business on what has become a chaotic development and operational infrastructure. For example, it is not unusual for the average utilization of servers in a server farm to be between five percent and fifteen percent. This level of utilization is not efficient but it is not always easy to know which servers to remove from the server farm in order to increase the utilization rate.
The IT and application infrastructure is slowly becoming no longer fit for the purpose the business is beginning to demand from it. The rate of technology change is increasing and along with it there is an increase in the speed of take up of new technology. This is contributing to an unwieldy IT infrastructure and is not attuned to rapid change at the technology level or at the application level. In fact, some financial enterprises can now take longer to deploy a new software product release than the maintenance life cycle of the product itself, leading to increased operational risk. Further, it can also take longer to develop and deploy a new financial product than the window of opportunity for that product remains open.
It has now become apparent that current technology models can no loner sustain the increasing rate and pace of change that is demanded of it by the business. Hence there is a need within the art for a new technology model that is able to rapidly absorb a number of changing technical and business factors and parameters and thus evolve with the ever changing business environment. For this new model to be supported, the IT organization will need to develop new capabilities, such as technical infrastructure, development methods, operational competencies, skills and best practices.